abitare (33.41)

Surf is Up! Get the Barneys Out of the Water!

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Adam Carolla (comedian-Man Show) unloaded some wisdom on his show one day. Carolla said the first sign of stupid guy is one that does not recognize the current circumstance and make adjustments in their behavior to the current circumstance. He gave the example of the suspects on the TV show COPS, even after the police showed up, the stupid guy in the “wife beater T-shirt” continued to carry on like the Cops were not there.

The suspects did not respect/understand their authority and they did not make the adjustments in their behavior to the new circumstance of their arrival on the scene. Handcuffs, taser, follow on police club to _______, read Mirada rights, sitting in back of police car, can wise up SOME of the dumbest of criminals. But some continue to carry on the way to the police station.

Everyone is a Genius in a Bull Market. But markets can change directions, as the supply of “greater and later fools” and “liquidity” dries up. Many of the “ALLSTARS” aka “bull market genius”, who rode exclusively the B.R.I.C. story, commodity bubble, real estate bubble up or down, gold run up, oil bulls are getting taken out.

Being good at anything of value takes time and effort, many do not recognize this. MAD MONEY, FAST MONEY, CNBC cheerleading, All Stars long only gold, miners, oil, short only financials make it look like easy.

SURF IS UP!

Califorina Surfing is a lifestyle, it takes a lot of time, energy and SUFFERING to understand and surf well. Hopping off a plane and becoming “surfer” on your TWO WEEK vacation is NOT POSSIBLE in SOCAL. I still have my three surf boards and several wet suits. I have boards for different surf conditions. I would choose the board, wetsuit and surf spot for the right conditions. (NOTE: I do NOT call myself, a “Surfer”, anymore, that would be a lie, I have not surfed in years, I am to out of shape, and surfing is a lot of exercise. I “used to surf”, is the correct answer. )

A big part of surfing has to do with the weather and wave conditions. “How are the waves?” is a question a REAL SURFER knows and understands before he swims out in the waters. Wave conditions can change, watching the waves and determining where to position yourself is a LARGE part of the sport. Another part is being “in shape” enough to swim through the “beach break” and to position yourself at the break.

The surf is definitely “up” in this market. Newbies (aka “Barneys”) better take a real look at their abilities and make the right decision based on their experience level. “When in doubt hands out” they say in trading terms. If you are not sure of a position, GET OUT aka “safe”.

There are multiple factors at play in the US market. Let me make a list of factors you could consider:

1. War

2. The GS CEO running the US Treasury

3. Enron loophole

4. Declining housing = declining wealth effect = reduced consumption

5. A Presidential election of a platitude speaking kid with an ultra thin resume, likely socialist agenda and same foreign policy that is ….well bankrupting the US?

6. Collapsing housing and F.I.R.E. economy

7. Insolvent FDIC and looming bank failures

8. Insolvent Fannie Mae and Freddie Mac, foreigners are not going to lend them money

16. American produce little and sell all their assets to maintain their current lifestyles

17. Baby boomers are lining up to collect Social Security and go on the “dole” of the government 18. The first GLOBAL RECESSION

19. Multiple countries are having food related and stability problems

20. Soros says the 60 year credit expansion are over

21. Jim Rogers says you have “to get out of the dollar”

22. 40% of Americans are OBESSE, there are health costs the NATION will pay for this stupidity 23. Commodity bubble implosion will take out many “leveraged hedge funds”

24. The Media black out on the severity of the crisis

25. Russian invasion of Georgia, ignoring the US and NATO

26. China market is down nearly 50% (my guess was 40% in Dec 07)

27. Blank check and authority for a greater war

28. Commodity bubble implosion

29. Extreme leverage of investment banks and hedge funds

30. Rogers says “you have to get out of the dollar”

31. American labor is not competitive to Asia

32. The FED and Treasury have intervened multiple times to prop up this market

33. In an election year markets usually rally, NOT this year, even with the inflation

These are some issues you should be able to address if you are “surfing” in the current market. If you cannot support your current positions in regards to these issues, I would consider getting out or ensuring you have a stop loss.

There is no shame in “watching from the beach” if you cannot handle the current conditions. In fact, after the extremely corrupt FED and Treasury intervened to destroy the shorts back in Aug 07, I went into cash (ref my CAPS fall from 4k to 15k). I read some books, called my CFA uncle with 20+ years in this game and eventually got back in the market. I am up +30% YTD (you can look at my updown.com portfolio: abitarecatania)

For some the market has gotten scary, conditions are extreme and dangerous and those BARNEYS should get out of the water before they get hurt or drown. The US market conditions are extreme, like an inbound hurricane. The volatility is a sign of weakening market, of FEAR! FEAR is the Mother of PANIC! PANIC is an extreme contrition where wealth is transferred to those that are standing by to pounce on it. For some of us these hurricane conditions are a once in a lifetime opportunity to catch some EPIC waves aka ROI. Blood on the streets or blood on the beach….

NOTE: CA does not get “hurricane conditions”, you have to wait for winter or a storm. Don’t go talking about hurricane conditions in CA, that is East Coast talk.

I like making analogies and I also like people who use them to explain a point of view. Often time’s people are galvanized in a position and no matter what you say it won’t make sense. Taking it out of context to then put it back into context is very effective. Kudos on a good post.

Ares, funny analogy. You were a surfer? Personally I am pretty scared of the sea. There are so many animals in there. I tried windsurfing as a teenager, but as I said I'm scared of the waters and what's in there.

As for the commodities "bubble imploding", I agree with Anomalee here. This is a correction in a long term fundamental bull market. Even Jim Rogers agrees (otherwise I would be careful too).

China and India will continue to grow, albeit at a slower pace. So growing at 8% instead of 10% is not too bad. China will start their factories again soon, which they stopped for the Olympics, to get clean air. Jim Rogers himself thinks this will be one of the great powers in this century.

Panic is usually what is seen close to an important bottom. We are close.

BTW, look at long term charts, 20 years or so. You will see that almost any long term bull market has had several important corrections. Gold for example dropped 50% in 1974, I think. After that correction it rose 750% until the true top in 1980.

Oil is down from $145 to $107. So what, that's 25%. It could drop more. I said oil was due for a correction.

Gold is down from $1000+ to $800. So what, that's 20%. It could drop more. And again, I said in the spring that gold would go nowhere for a while.

Most commodities have already corrected quite a lot. China usually starts buying in quantities at the beginning of each year.

I know, you read Gary North. This guy is a doomsday prophet. Try a google search on him on what he said about y2k.